Self employment
Self-employment is working for one's self rather than for another person or company. To be self-employed, an individual is normally highly skilled in a trade or has a niche product or service for their local community. With the creation of the Internet the ability for an individual to become self-employed has increased dramatically. Self-employed people can also be referred to as a person who works for himself/herself instead of an employer, but drawing income from a trade or business that they operate personally. To be self-employed is not the same as being a business owner: A business owner is not required to be hands-on with the day-to-day operations of his or her company, while a self-employed person has to utilize a very hands-on approach in order to survive. It was said that 1 out of 5 new businesses failed within the first few years in North America, but success or failure in a business cannot be accurately predicted. Taxation in the US In the United States, a person is considered self-employed for tax purposes if that person is running a business as a sole proprietorship, independent contractor, as a member of a partnership, or as a member of a limited liability company that does not elect to be treated as a corporation. In addition to income taxes, these individuals must pay Social Security and Medicare taxes in the form of a SECA (Self-Employment Contributions Act) tax. The self-employment tax in the United States is currently set at 15.30% which is the equivalent of the combined contributions of the employee and employer under the FICA tax. The rate consists of two parts: 12.4% for social security and 2.9% for Medicare. The social security portion of the self-employment tax only applies to the first $106,800 of income for the 2009 tax year. There is no limit to the amount that is taxable under the 2.9% Medicare portion of the self-employment tax. Half of the hypothetical self-employment tax is allowed as a deduction against self-employment income so only 92.35% of the self-employment income is taxable at 15.30%, an effective tax rate of about 14.13%. However, this benefit disappears if self-employment income exceeds $105,577, since the entire applicable amount of $97,500 will be taxed at 15.30%. Self-employed persons are sometimes eligible for more deductions than an ordinary employee. Travel, uniforms, computer equipment, cell phones, etc., can be deducted as legitimate business expenses. Self-employed persons report their business income or loss on Schedule C of IRS Form 1040 and calculate the self-employment tax on Schedule SE of IRS Form 1040. Estimated taxes must be paid quarterly using form 1040-ES if estimated tax liability exceeds $1,000. Self-employed 401k retirement account Self-employed workers cannot contribute to a company-run 401k plan of the type with which most people are familiar. However, there are various vehicles available to self-employed individuals to save for retirement to be Roth. An individual 401k plan can be established, with a the potential to allow portion of the contributions Many set up a Simplified Employee Pension Plan (SEP) IRA, which allows them to contribute up to 25% of their income, up to $49,000 (2009) per year. There is also a vehicle called the Self-Employed 401k or SE 401k for self-employed people. The contribution limits vary slightly depending on how your business is organized but are generally higher than the other types of plans. Self-employment law in the United Kingdom A self-employed person in the [[United Kingdom can operate as a sole trader or as an incorporated limited liability company. It is also possible for someone to form a business that is run only part-time or concurrently while holding down a full time job. This form of employment, while popular, does come with several legal responsibilities. When working from home clearance is required from the local authority to use part of the home as business premises. Should the business hold records of customers or suppliers in any electronic form it is required to register with the Information Commissioner's Office. Other legal responsibilities include statutory public liability insurance cover, modifying premises to be di. Free advice on the range of responsibilities is available from government operated Business Link centres. Taxation in the UK A self-employed person may be subject to more taxes than an average employee. In addition to both the employee and employer National Insurance contributions, there may be VAT, business rates and other taxes payable to central and local governments. Both the in US and the UK, governments are cracking down on disguised employment, often described as the pretense of a contractual intra-business relationship to hide what is otherwise a simple employer-employee relationship. See also *Business *Entrepreneurship *Ownership *[Retailing External links *The Internal Revenue Service [U.S.] Category:Employment Category:Employment classifications